CPI Hints At Some Inflation Pressures, Analysts React

Consumer prices edged up last month amid spiking gasoline costs, hinting that new inflation pressures may be hitting the economy.

The consumer-price index, or CPI, rose 0.2% in January from a month earlier and 2.9% from a year ago, according to the Labor Department. The monthly results fell shy of economists’ forecast of a 0.3% gain.

Core prices, which exclude food and energy costs, rose 0.2% in January from a month earlier.

As prices edge up, it’s worth remembering the Fed has a 2.0% annual inflation target. Higher inflation could hinder the central bank’s efforts to prop up the economy with additional stimulative measures, such as QE3.

Stock futures yawned and are trading roughly where they were before the report was released. Dow futures are 36 points, while S&P 500 futures have tacked on 2 points.

Here’s a couple of quick reactions from some of our favorite market scribes:

Alan Ruskin at Deutsche Bank: No significant surprises in the CPI report. Core CPI shows a few signs of edging marginally higher thanks to owners equivalent rent now stuck firmly at 0.2% per month, and medical care running near 4% annualized. Strong apparel offset vehicles, and most other components were fairly close to trend. Core CPI probably has to accelerate beyond 2.5% annualized over 3 months to become another factor that will make the market question whether the Fed can keep its prospective tightening to late 2014 or beyond.

Dan Greenhaus at BTIG: With regards to the January CPI, the results were largely in line with expectations. Gasoline prices were supposed to rise; they did. Used car prices were supposed to fall; they did. The large jump in apparel prices is interesting though. Irrespective of what expectations were, the apparel price index has surged since early 2011 and is no doubt having an effect on clothing prices. Apparel prices are up at a more than 6% annualized pace since the spring of 2011. Importantly, owner’s equivalent rent – which itself is roughly 30% of the core CPI – remains relatively constrained…We do not expect a rapid rise in core inflation over the rest of this year and indeed, core inflation could move lower if other components perform in a particularly weak way. But developments on the rental front must be watched for indications that a calm viewing of the inflation landscape is misguided.

Comments (3 of 3)

The conscious depreciation of the dollar by Ben no matter how small or large is really a form of stealing from savers and giving it to lenders......................thief no other name is better

9:25 am February 17, 2012

Wait, What? wrote :

"We don't expect a rapid rise in core inflation" One should hope not, considering this: "the index for all items less food and energy has risen 2.3 percent, its largest 12-month increase since September 2008."

9:23 am February 17, 2012

Joe consumer wrote :

....If the increases are so minuscule -minus food/energy,then whycome the prices at the fuel pump and grocery store are up like 5-10 percent? Just a query from one of the many great unwashed who actually live in reality:)

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